Process

Will New Zealand ratify the CPTPP?

Signing CPTPP does not commit New Zealand to ratification of the Agreement. Before making a final decision, the government wants to continue to share information on the CPTPP and hear New Zealanders’ views.

The New Zealand Parliament will examine the CPTPP before the government reaches a final decision on whether to ratify it.

When will the CPTPP enter into force?

“Entry into force” is the term for when treaties, including trade agreements, start taking practical effect for the countries that have ratified them.

For the CPTPP, we think this could happen within a year to 18 months of signature.

After the agreement is signed, the CPTPP still won’t be implemented in New Zealand unless at least half the signing countries ratify it and unless New Zealand is one of those countries.

Unlike TPP, the CPTPP has no requirement for any particular country to ratify the Agreement before it can enter into force.

Can the membership of the CPTPP change in the future?

Yes. There is an accession process built into the CPTPP.

This means that other trading partners will be able to join the CPTPP in the future if existing CPTPP countries agree.

The CPTPP may, therefore, lead to better access to even more markets for New Zealand exporters further down the track.

The CPTPP and New Zealand's sovereignty

Does the Agreement affect the Treaty of Waitangi?

The CPTPP contains a Treaty of Waitangi exception that explicitly allows the government to adopt any policy it considers necessary to fulfil its obligations to Māori.

This unique provision allows the government to implement policies which benefit Māori without being obliged to offer equivalent treatment to persons from other CPTPP countries.

The Treaty of Waitangi exception is just one of a number of exceptions and reservations which ensure that our government retains its right to regulate in the public interest.

Does the CPTPP undermine New Zealand’s sovereignty?

No. We can continue to make our own choices that are in our own best interests. New Zealand also retains the right to withdraw from the Agreement in the future should the government wish to.

The outcome reached in Da Nang preserves our right to regulate in the public interest, including in relation to our health system, Pharmac, our public education system, our environment, our biosecurity, our national security and our national treasures.

As with other trade agreements, the CPTPP reaffirms the participating countries’ commitment not to deliberately misuse regulations that are not for legitimate public purposes but are unjustified disguised or discriminatory barriers to trade.

We have an interest in ensuring that other countries do not introduce disguised protectionist trade barriers on our exports, where these have no legitimate policy rationale.

Housing and investment

Will New Zealand be able to impose restrictions on foreigners buying houses?

Yes. The New Zealand Government has announced plans to introduce new legislation that will restrict overseas buyers of New Zealand homes. This process will be completed before the date CPTPP enters into force.

Will New Zealand still be able to screen overseas investment?

Yes. The CPTPP preserves our right to screen overseas investment in the three existing areas of significant business assets, sensitive land (including farmland), and fishing quota.

New Zealand also maintains the right to change screening criteria in relation to those areas.

Is Investor-State Dispute Settlement (ISDS) in the Agreement?

Yes, but there is reduced scope for investors to use ISDS to take a case against the New Zealand Government.

Under the CPTPP, private companies who enter into an investment contract with the government will not be able to use ISDS if there is a dispute about that contract. New Zealand’s investment screening regime also remains excluded from ISDS.

Reciprocal side letters with Australia, Brunei Darussalam, Malaysia, Peru and Viet Nam mean that compulsory ISDS will not apply between New Zealand and these countries.

This means that over 80% of foreign direct investment into NZ from CPTPP parties by value will not be subject to ISDS – in other words, investors that provide over 80% of investment from the CPTPP region into New Zealand will not be able to use the CPTPP ISDS mechanism to sue the New Zealand Government.

Why was ISDS not removed from the CPTPP altogether?

While some countries share New Zealand’s concerns, others wanted to retain ISDS as they consider it a commercial priority. In these circumstances, and given it was part of the TPP, it was not possible to remove ISDS altogether.

Will CPTPP expose New Zealand to ISDS for the first time?

No. New Zealand currently has ISDS with around 14 economies. This was negotiated as part of Bilateral Investment Treaties with China (1989) and Hong Kong (1995) and more recently as part of FTAs with Singapore (2001), Thailand (2005), China (2008), ASEAN countries (2009), Malaysia (2010), Chinese Taipei (2013) and Korea (2015). To date, no ISDS claims have been filed against the New Zealand Government under any of these agreements.

Given that investors can sue governments in ISDS cases, won't the ISDS provisions in CPTPP be risky for New Zealand?

As part of CPTPP, we negotiated successfully to secure strong safeguards around what can and can't be subject to ISDS claims. These safeguards will ensure the government is not hindered in its ability to regulate in the public interest. The new agreement narrows the scope for investors to successfully sue the New Zealand Government, compared with the Trans Pacific Partnership.

Does ISDS give foreign companies an advantage over New Zealand companies?

In New Zealand, local companies cannot bring an ISDS claim against the New Zealand Government, although New Zealand investors will also have the right to take ISDS cases against CPTPP countries. ISDS claims can only relate to disputes about the investment provisions of CPTPP.

Do corporations get to dictate how ISDS panels are formed?

No. The CPTPP text has procedures that would govern the formation of ISDS panels.

The panels would have three arbitrators: one appointed by the government, one appointed by the claimant and a presiding arbitrator appointed by the government and the claimant together.

Labour and environment

How does the CPTPP affect labour standards?

The CPTPP constitutes the strongest outcome on trade and labour contained in any of New Zealand’s free trade agreements to date.

The commitments made in the labour chapter are intended to protect and enforce labour rights, improve working conditions and living standards, strengthen cooperation on labour issues and enhance labour capacity and capability of the CPTPP parties.

For the first time, these obligations can be enforced through dispute settlement.

The provisions help level the playing field for New Zealand companies and employees by setting common labour obligations for all CPTPP parties.

This helps ensure that CPTPP parties do not have a competitive advantage in trade based on poorly-enforced or inadequate labour laws. More information on the specific obligations can be found on our webpage on labour and environment in the CPTPP.

What are the main environmental outcomes of the CPTPP?

The CPTPP constitutes the strongest outcome on trade and environment in any of New Zealand’s trade agreements to date.

The commitments in the environment chapter will help protect the environment by requiring parties to follow through with commitments made in international environmental agreements and by making these subject to dispute settlement.

The agreement also introduces new disciplines on fisheries subsidies that contribute to over-fishing, and obligations requiring the parties to take action to address the illegal trade of wild flora and fauna. More information on the specific obligations can be found on our on our webpage on labour and environment in the CPTPP.

Can New Zealand continue to protect its environment?

Yes. The CPTPP includes a number of exceptions and reservations which ensure that the government retains the right to regulate in the public interest, including in relation to the environment.

The Government would not accept an outcome that prevents it from regulating for legitimate public policy purposes. The CPTPP will also not require New Zealand to change its laws or regulations on genetically modified organisms (GMOs).

Will the CPTPP lead to more agricultural production than the New Zealand environment can sustain?

The CPTPP will remove tariffs and other barriers to New Zealand’s exports while preserving the government's right to regulate to protect our environment.

The Resource Management Act (RMA) is the primary piece of legislation which manages the use of natural resources including the discharge of contaminants into New Zealand's air, land or water.

It requires resource users, including farm owners, to avoid, remedy or mitigate any adverse effects on the environment. Penalties for breaching the RMA include imprisonment for up to two years or a fine of up to NZ$300,000.

Pharmaceuticals and intellectual property

Will the CPTPP have an impact on the government’s right to regulate in the area of public health?

No. The CPTPP includes a number of exceptions and reservations which ensure that the government retains the right to regulate in the public interest, including in relation to public health.

The Government would not accept an outcome that prevents it from regulating for legitimate public policy purposes.

What does the CPTPP mean for Pharmac?

Pharmac’s purchasing model remains protected, including its ability to negotiate the best price for medicines for New Zealanders.

In addition, a provision that would have required Pharmac to make administrative changes that would have primarily benefited the pharmaceutical industry has been suspended.

Implementing these changes was expected to cost New Zealand an initial $4.5 million and $2.2 million per year thereafter.

What other pharmaceutical-related provisions have been suspended?

The TPP would have locked in some of our existing laws and practices that protect new medicines from competition with generic copies.

Under the CPTPP, there is now no requirement for New Zealand to change or retain its existing data or market protection settings for new medicines, including biologics (medicines derived from a living system such as plant or animal cells).

CPTPP countries also agreed to suspend the obligations to extend the term of a patent in cases where there had been unreasonable delays in:

i) granting that patent, or

ii) if the patent was for a medicine, obtaining approval for the medicine’s entry into the New Zealand market.

Which other intellectual property provisions have been suspended?

A number of the intellectual property provisions included in the TPP will be suspended from the CPTPP, saving us from having to make changes likely to impose some costs on New Zealand.

For example, we no longer need to extend our copyright term to 70 years (from 50 years). This removes one of the most significant quantified costs of the TPP for New Zealand.

A total of 11 intellectual property provisions have been suspended from the CPTPP.

Goods outcomes

What market access outcomes were achieved?

With the exception of market access to the United States, all the other market access outcomes New Zealand achieved in the TPP have been retained in the CPTPP.

This includes providing New Zealand exporters with preferential access for the first time into Japan, the world’s third-largest economy and our fifth-largest export market.

It will also be New Zealand’s first free trade agreement (FTA) relationship with Canada, Mexico, and Peru.

The high-quality outcomes negotiated in the CPTPP mean it will also deliver some benefits for our investors and exporters over and above the market access we achieved in our existing FTAs with Brunei, Chile, Malaysia, Singapore, and Viet Nam.

This is critically important as some of our competitors in these markets already enjoy lower tariffs because of their own separate free trade agreements.

For example, Australia has an FTA with Japan and the 28-members of the EU soon will too.

What will the CPTPP deliver for goods exporters?

We estimate our goods exporters will benefit from NZ$222 million in tariff reductions per year once the CPTPP is fully implemented.

NZ$95 million of those savings will start as soon as the CPTPP enters into force. Our previous experience suggests that these are conservative estimates.

By way of comparison, for instance, the annual tariff reductions from New Zealand’s free trade agreement with China were initially estimated at NZ$115 million a year.

Since then, trade growth has seen New Zealand’s annual exports to China quadruple.

Services outcomes and government procurement

What benefits does the CPTPP provide to services exporters?

The CPTPP will help to level the playing field for New Zealand services exporters.

Other CPTPP countries have committed to treating New Zealand services suppliers the same as their domestic services suppliers in a number of areas including professional, business, education, environmental, transportation and distribution services.

Will the CPTPP constrain the government’s ability to fund public education?

No. The CPTPP has no effect on the New Zealand government’s discretion to fund public education in the way we want to.

What benefits does the CPTPP provide in terms of government procurement?

The CPTPP will open up greater opportunities to bid for foreign government contracts, particularly in Malaysia, Mexico, Peru and Viet Nam.

New Zealand businesses will be able to compete for government procurement contracts in CPTPP countries on an equal footing with domestic suppliers.

The CPTPP also provides New Zealand with better access to government contracts in Canada, Japan, and Singapore over and above the access we have already secured to those markets through the World Trade Organisation Agreement on Government Procurement.

E-commerce

What will the CPTPP e-commerce chapter mean for data transfer and localisation rules?

The CPTPP e-commerce chapter contains rules which help ensure businesses are able to transfer data across borders, and are not forced to store their data within any particular jurisdiction.

This will help to remove trade barriers for New Zealand exporters, particularly those operating in more innovative, data-driven sectors.

These rules come with a “public policy safeguard”, which gives governments the discretion to control the movement and storage of data for legitimate public policy objectives.

This is designed to ensure governments are able to respond to the changing digital landscape in areas such as privacy, data protection and cybersecurity.

Will any legislative change be required as a result of these provisions?

No. New Zealand currently maintains several measures that control the movement or storage of data.

We restrict the movement offshore of sensitive personal health data, for example, and require businesses to store tax data in New Zealand or with an offshore provider approved by the New Zealand Tax Commissioner.

The CPTPP will not prevent New Zealand from applying these kinds of measures because they fall within a “public policy safeguard” included as part of these provisions.

State-owned enterprises (SOEs)

Will the CPTPP mean New Zealand can run state-owned enterprises the way we want?

Yes. The CPTPP aims to ensure a level playing field between state-owned companies engaged in commercial activities and their private competitors.

It will do this by addressing the potentially distortive effect that preferential treatment for SOEs can have on international trade and investment.

However, our own state-owned commercial companies are already set up to operate on a level playing field with privately owned companies and are subject to domestic competition laws.

New Zealand's current approach therefore meets the CPTPP obligations and is in line with international best practice.

Will the CPTPP prevent New Zealand from setting up the state-owned enterprises we want?

No. TPP would not prevent the government from establishing new state-owned enterprises.

Only New Zealand’s larger state-owned companies are covered by the obligations in the CPTPP. The CPTPP sets a threshold to exclude entities with an annual revenue from commercial activities below around NZ$400 million (to be adjusted every three years).

The provisions do not apply to entities such as district health boards, crown research institutes, or public health institutions and service providers.

Will the CPTPP prevent any government from nationalising private firms in the future?

No. Nothing in the agreement prevents future nationalisation. However, consistent with international law and domestic practice, fair compensation would need to be paid to owners.

Economic Modelling

Has economic modelling been done for the CPTPP?

The Ministry of Foreign Affairs and Trade commissioned experienced international trade modellers, ImpactEcon, to estimate the economic effects of CPTPP on New Zealand. ImpactEcon estimates that once CPTPP is fully implemented, New Zealand’s annual GDP would be between NZ$1.2 and NZ$4.0 billion more than it would have been, if there was no agreement.